U.S. stocks slip while yields rise, Fed in focus

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  • Fed Dominates Broader Markets, Dollar Appreciates
  • Oil drops on demand worries, US railroad strike averted
  • Treasury Yields Climb as Oil Gold Falls

NEW YORK, Sept 15 (Reuters) – Wall Street indexes were firmly in the red after a choppy start to trading on Thursday, while bond yields rose as investors digested economic data that provided the Federal Reserve little reason to ease its aggressive cycle of rising interest rates.

Oil futures fell more than 3% on demand concerns and after a tentative agreement that would avert a US railroad strike, as well as continued strength in the US dollar with expectations for a sharp rise in US rates. Read more

Economic data showed U.S. retail sales unexpectedly rebounded in August as Americans increased purchases of motor vehicles and dined more while taking advantage of lower gasoline prices. But July data has been revised down to show retail sales have fallen rather than stagnating as previously reported.

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Separately, the Labor Department said initial claims for state unemployment benefits fell for the week ended Sept. 10 to the lowest level since late May. Read more

Investors widely expect an aggressive rate hike after the Federal Open Market Committee (FOMC) meeting next week, but are nervously awaiting clues from Fed Chairman Jerome Powell on future policy action, Quincy said. Krosby, chief global strategist at LPL Financial.

“The market remains choppy knowing there is a Fed meeting next week. Even though participants agree it will be a 75 basis point rate hike, that’s what the statement adds to previous comments and what President Powell said in his press conference” that had them concerned, Krosby said.

The Dow Jones Industrial Average (.DJI) fell 173.07 points, or 0.56%, to 30,962.02; the S&P 500 (.SPX) lost 44.69 points, or 1.13%, to 3,901.32 and the Nasdaq Composite (.IXIC) lost 167.32 points, or 1.43%, to 11,552, 36.

The MSCI gauge of stocks across the world (.MIWD00000PUS) lost 0.96% while emerging market stocks (.MSCIEF) lost 0.57%.

Stocks, bonds and currencies on Thursday showed a market “increasingly understanding that the Fed is going to move more aggressively next week,” said Scott Ladner, chief investment officer at Horizon Investments in Charlotte, North Carolina. .

Referring in particular to the still strong labor market, Ladner said “the economic numbers released today are a sign of the situation.”

Treasury yields rose, the two-year to new 15-year highs, after data on retail sales and jobless claims showed a resilient economy that gives the Fed enough leeway to increase aggressively interest rates.

Also already signaling a recession, the inverted yield curve – the spread between 2-year and 10-year Treasury yields – widened further to -41.4 basis points, from -13.0 points basic a week ago.

Benchmark 10-year bonds rose 4.5 basis points to 3.457%, from 3.412% on Wednesday evening. The 30-year bond last fell 5/32 to 3.4779% from 3.469%. The 2-year note last fell 5/32 in price to yield 3.8646% from 3.782%.

“In this vicious cycle where the data continues to remain resilient, that would imply a Fed that would likely stay the course and continue to tighten policy,” said Subadra Rajappa, head of US rates strategy at Societe Generale in New York.

The World Bank’s assessment that the world could be heading into a global recession, as central banks around the world simultaneously raise interest rates to combat lingering inflation, also clouded investors’ moods. Thursday. Read more

In currencies, the dollar was slightly higher against the yen while the Swiss franc reached its highest level against the euro since 2015. Read more

The dollar index, which measures the greenback against a basket of major currencies, rose 0.091%, with the euro up 0.18% at $0.9995.

The Japanese yen weakened 0.19% against the greenback at 143.44 to the dollar, while the pound last traded at $1.1469, down 0.57% on the day.

Before the tentative labor agreement, fears of a strike by U.S. railroad workers had supported oil prices due to supply issues on Wednesday. In addition, the International Energy Agency (IEA) said this week that oil demand growth will come to a halt in the fourth quarter.

U.S. crude settled 3.82% at $85.10 a barrel while Brent ended at $90.84, down 3.46% on the day.

Gold fell to its lowest level since April 2021, hurt by high US Treasury yields and a firm dollar, as bets on another sharp Fed rate hike eroded bullion’s appeal.

Spot gold fell 1.9% to $1,664.46 an ounce. US gold futures fell 2.02% to $1,662.30 an ounce.

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Additional reporting by Herbert Lash in New York, Marc Jones in London, Stefano Rebaudo in Milan, Tom Westbrook in Singapore and Wayne Cole in Sydney; Editing by Kirsten Donovan and Jonathan Oatis

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